All right gang I have been struggling with this oil thing for awhile. I have suspicions about a few things, like our government being responsible for it. What is in it for the Saudis? What is the end goal? And why would Obama support in apparent contradiction to his anti petrol policies. I have done a ton of reading of various opinions, and played with many scenarios, trying to come up with a reasonable plausible explanation. If it were to crush Russia it would be a simplistic plan not worthy of supposedly smart people. Iran? Same thing. A simple explanation of over supply? Then why would the Saudis and others continue to produce at a level that does not allow price stabilization at $80-100 levels. One barrel at $100 is better than two barrels at $45. How about the theory of the Saudis trying to crush our shale industry? The oil market is plenty big enough for the shale industry. Shale was not a serious long term threat to the more desirable middle east crude. The expense of pulling shale oil out of the ground actually supports +$90 barrel pricing. Also the military support the u.S. provides the middle east dictators also provides considerable clout in the decisions these dictators make. The Saudis would not be crashing oil prices without our permission. So, why? Remember in 2008 Obama told a group of news editors, You know, when I was asked earlier about the issue of coal, uh, you know — Under my plan of a cap and trade system, electricity rates would necessarily skyrocket. Even regardless of what I say about whether coal is good or bad. Because I’m capping greenhouse gases, coal power plants, you know, natural gas, you name it — whatever the plants were, whatever the industry was, uh, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers. Obama has been unsuccessful getting his cap and trade and pretty much all of his energy bills passed. He has had to use regulation to implement what he can. My theory on crashing oil prices is Obama has forced the Saudis to support $45 oil to crush American oil production. Shale, deep water, Sand, even traditional wells. These wells will continue to produce, but at these prices no new wells will be drilled. The shale oil wells, according to James Kunstler, will produce for a year and there will be no new ones drilled when they peter out — which is at least 50 percent the first year and all gone after four years. He continues, the financial structure of the shale play was suicidal from the get-go. You finance the drilling and fracking with high-yield “junk bonds,” that is, money borrowed from “investors.” You drill like mad and you produce a lot of oil, but even at $105-a-barrel you can’t make profit, meaning you can’t really pay back the investors who loaned you all that money, a lot of it obtained via Too Big To Fail bank carry-trades, levered-up on ”margin,” which allowed said investors to pretend they were risking more money than they had. And then all those levered-up investments — i.e. bets — get hedged in a ghostly underworld of unregulated derivatives contracts that pretend to act as insurance against bad bets with funny money, but in reality can never pay out because the money is not there (and never was.) And then come the margin calls. So by giving the American people exactly what they think they want, low gas prices, Obama takes credit and is loved as a great leader. All the while he has used this gift as a trojan horse to be opened at a later date resulting in the destruction of the production capability of the North American oil producers. As long as this post is it is still very short on what the effects of these actions are going to be over the next few years. The absolute destruction of the American economy is one of these casualties. But to those who intend to completely transform this country into their own desired utopia this is a small price to pay.
Posted on: Tue, 20 Jan 2015 05:59:22 +0000
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